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PHILIP MORRIS INC. v. PITTSBURGH PENGUINS

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA


October 31, 1983

PHILIP MORRIS INCORPORATED, Plaintiff,
v.
PITTSBURGH PENGUINS, INC. and CIVIC ARENA CORPORATION, American Sign and Indicator Corporation, Defendants

The opinion of the court was delivered by: COHILL

COHILL, D.J.

 I. Procedural Background

 This case comes before us on a complaint seeking, inter alia, a preliminary injunction, restraining and enjoining the Pittsburgh Penguins, Inc. ("Penguins") and the Civic Arena Corporation ("CAC") from interfering with a contract for advertising at the Civic Arena ("Arena") entered into by the plaintiff, Philip Morris Incorporated ("Philip Morris"), and the Penguins, and from interfering with advertising sold or rented to the plaintiff under the aforementioned contract.

 An amended complaint was filed by the plaintiff in which American Sign & Indicator Corporation ("AS&I") was joined as a defendant. In this complaint, the plaintiff seeks to restrain and enjoin AS&I from interfering with and conspiring to interfere with plaintiff's rights under the advertising contract.

 Subsequent to filing the amended complaint, defendants' counsel sent a letter to plaintiff's counsel, informing them of CAC's intent to install a new scoreboard in the Arena and to replace plaintiff's scoreboard advertising display with the advertisement of another tobacco company. In light of this letter, on September 9, 1983, plaintiff sought a Temporary Restraining Order ("TRO") to enjoin the defendants from altering any of plaintiff's displays at the Arena or installing any new advertisements without plaintiff's approval until this Court rendered a decision as to the complaint. The request was granted.

 On October 11, 1983, we conducted a hearing on plaintiff's complaint and Motion for a Preliminary Injunction. At the hearing, defendants objected to equitable relief in the form of an injunction on the grounds that the complaint sounded in contract law and, as such, any possible damages could be measured and enforced in law. Thus, the plaintiff would not be irreparably harmed. We disagreed and held that, if the defendants were to remove and replace any of the plaintiff's advertising displays before this case was adjudicated, irreparable harm would occur. We held that there is no way that monetary damages could be calculated for the loss of prospective customers due to the absence of the plaintiff's signs on the top panels of the scoreboard. As such, we proceeded in equity and conducted a hearing on the Motion for Preliminary Injunction. Pursuant to Fed. R. Civ. P. 65 (a)(2), we consolidated the hearing on the motion with a trial on the merits. At the conclusion of the hearing, we continued the TRO until our opinion was filed.

 In accordance with Fed. R. Civ. P. 65(d), we make the following findings:

 Plaintiff, Philip Morris Incorporated is a Virginia corporation. Its primary business is manufacturing tobacco products, including such brands of cigarettes as Marlboro, Virginia Slims and Benson & Hedges.

 Defendant, Pittsburgh Penguins, Inc., is a Pennsylvania corporation owned by the Edward J. DeBartolo Corporation ("DeBartolo Corporation"). *fn1" The Penguins is a National Hockey League team.

 Defendant, Civic Arena Corporation, is also a Pennsylvania corporation owned by the DeBartolo Corporation. CAC was formed in 1981 for the purpose of taking over the operational control of the Arena from the Public Auditorium Authority of Pittsburgh and Allegheny County ("Authority"). The Arena is a large circular facility located in downtown Pittsburgh in which sports events, concerts, conventions and other public activities are held.

 Defendant, American Sign & Indicator Corporation, was formed under the laws of the State of Washington. Its business is to manufacture advertising displays, scoreboards and other signs.

 II. Findings of Fact

 A. Advertising Agreement (Authority-Penguins)

 On June 1, 1971, the Authority, which at that time both owned and operated the Arena, entered into a ten-year lease with the Pittsburgh Penguins Partnership, allowing the hockey games to be played at the Arena. The lease specifically forbade the Penguins Partners to advertise at the Arena. In 1975, the partnership went bankrupt.

 In July, 1975, Pittsburgh Penguins, Inc. (the present corporation) was formed. *fn2" It acquired the hockey team and, through assignment, continued under the 1971 lease. However, on October 25, 1976, the Authority entered into a new ten-year lease with the Penguins. It, too, expressly prohibited any Arena advertising by the Penguins.

 On November 19, 1976, the Authority entered into a separate advertising agreement ("Agreement") with the Penguins. The Agreement gave the Penguins the right to sell advertising space on the interior of the Arena. The authority given to the Penguins was clearly expressed in paragraph 1 on the Agreement which provides:

 

1. Authority hereby grants to Penguins the right to sell advertising space and to affix advertising panels and equipment at locations on the interior of the Civic Arena approved by the Executive Director of the Authority.

 See, Plaintiff's Ex. 5.

 The Agreement required the Penguins to promptly advise the Authority of any sales made and to furnish the Authority with a contract of such sale. Id. at P 7. All advertising was subject to the Authority's approval and any advertisement contract could be rejected by the Authority. Id. at P 2. The Agreement was to terminate on May 31, 1978. Since the date of termination, the Penguins have not sold any advertising space in the Arena pursuant to this Agreement.

 B. Advertising Contract (Philip Morris-Penguins)

 While the Agreement was in effect, James McDonald, Director of Sales and Advertising for the Penguins, began soliciting prospective advertisers. In a letter dated August 5, 1977, sent to Mr. Vincent Weiner, Director of Special Media for Philip Morris, Mr. McDonald sought Philip Morris as a customer for the scoreboard advertising display areas. After quoting possible prices. Mr. McDonald concluded by stating,

 

Vince, if you're interested in the scoreboard, I can tie in season tickets, etc., and a long-term contract.

 See, Plaintiff's Ex. 2.

 After some negotiations between Messrs. McDonald and Weiner, an agreement for advertising was reached. On October 29, 1977, a contract was signed giving Philip Morris, inter alia, the exclusive right of tobacco advertising in and around the Arena and first refusal rights on other advertising. Plaintiff's Ex. 3, para. 2.2. In addition, the plaintiff was granted the right to display its own advertisements on the four panels on top of the scoreboard. Id. at P 1.0. As consideration for these rights, plaintiff agreed to pay $13,500.00 per year.

 The running of the contract was to commence on the date the display panels were installed on the scoreboard and "shall continue for a period of ten (10) years . . ." Id. at P 4.1. The panels were installed in 1977, therefore, the contract terms provide for a 1987 termination date.

 A standard advertising form contract was used in which the specifics were supplied by the parties in the blank spaces provided. The form contract remained intact except for a few changes. Since the Penguins did not own the Arena (as most sellers of advertising space do), the language dealing with the operator's ownership was stricken. Also removed were the paragraphs which provided for a pro rata refund to the advertiser in the event the contract was terminated after the Operator paid in advance. In their place, paragraph 6.2(a) was added which provides that, if the Penguins do not have the exclusive right to sell space, then the Agreement may be terminated by Philip Morris. The defendants argue that this paragraph, inserted at the request of plaintiff, shows that Philip Morris knew the Penguins' rights were limited. In interpreting this paragraph, we find that the plaintiff was merely protecting itself since the Penguins were not the owners of the Arena. Even if the plaintiff did know of the Penguins' limited authority, the Agreement does not express it. However, the paragraph remained which provides ". . . the Operator [Penguins] has the exclusive right to sell advertising space in the Stadium [Arena] . . .". Id. at 1.

 C. Dispute

 In 1977, following the creation of the advertising contract between plaintiff and the Penguins, signs advertising plaintiff's Marlboro Cigarettes were mounted on the Arena scoreboard. Each subsequent year, the plaintiff paid the $13,500.00 as required. This money was divided between the Authority and the Penguins, as provided for in their Agreement; the Authority received 25% and the Penguins received 75%. Plaintiff's Ex. 5 para. 4.

 In early 1978, shortly after the DeBartolo Corporation took control of the Penguins, J. Paul Martha, Vice-President and General Counsel for the Penguins, reviewed all of the contracts entered into by the Penguins, including the advertising contract between plaintiff and the Penguins. *fn3" In late 1978, he reached the opinion that the contract was unenforceable because the advertising space Agreement between the Authority and the Penguins terminated in May, 1978. Martha Tr. pp. 58-59. Thus, he opined that the Philip Morris - Penguin contract also expired in May, 1978. Even though he was of that opinion, nothing was done at that time by the Penguins to stop performance on the Philip Morris contract. In 1978, 1979 and 1980, plaintiff's payments continued to be accepted and split between the Authority and the Penguins.

 In July, 1981, CAC took control of the Arena. Thus, CAC shared in the revenue of the 1981 payment made by Philip Morris. *fn4"

 In early 1982, Mr. Martha met with Mr. William Strong, Vice-President of Communications for CAC. He showed Mr. Strong the advertising contract between Philip Morris and the Penguins and told him that he thought it was unenforceable. Mr. Strong reviewed the document and concurred. Still nothing was done. Plaintiff continued in 1982 to send its payment for $13,500.00 which was accepted and shared by CAC, the Penguins and the Spirit.

 In the early part of 1983, CAC and the Penguins decided that the Arena needed a new scoreboard since the old board had been malfunctioning for quite awhile. Therefore, bids were sought from various sign manufacturers.

 In a letter sent to Mr. Strong on March 22, 1983, Jim Turner, Sports Systems Specialist for AS&I, outlined his proposal for the new scoreboard. It is customary in the business that advertisers assume much of the cost of the new scoreboards on which their advertisements appear. Therefore, within the AS&I proposal is a section entitled "Advertising Sales." This section provides:

 

Considering other arenas in the country and the revenue being brought in, following is a breakdown of the advertising revenue we believe can be obtained. This is based on the fact that the existing Marlboro contract be broken if they do not wish to participate.

  Top Panel plus $100,000 per year Bottom Panel 85,000 per year Timer Panel 15,000 per year Center Panel 10,000 per year Total Revenue $210,000 per year

19831031

© 1992-2004 VersusLaw Inc.



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